S&P's recession forecast worse than downgrades - Zangana

S&P's latest raft of downgrades were largely priced into markets, but more worrying is its forecast of a high chance of a deep recession in the region, said Schroders' European economist Azad Zangana.

In a conference call on Monday, the ratings agency said it has revised its base scenario of stagnant or zero growth, and is now forecasting a 40% chance of recession in Europe this year. This would represent a 1.5% fall in GDP for 2012, said Zangana. This latest gloomy prediction follows a mass downgrade of nine eurozone countries last Friday, which saw France and Austria stripped of their AAA-status; Portugal, Malta, and Cyprus downgraded to ‘junk’ status; and Spain and Italy cut by two notches. Zangana said the market reaction to the downgrade was muted, with the yield on French 10-...